The federal estate tax exemption is $15 million in 2026. Most families will never owe a dollar in federal estate tax. Their state, however, is a different story. Seventeen states plus the District of Columbia impose their own estate or inheritance taxes, with thresholds that bear no relationship to the federal exemption. A family in Oregon faces an estate tax on assets above $1 million. In Massachusetts, the threshold is $2 million. In both states, the top rate is 16%. These state taxes exist entirely independently of the federal system. The federal exemption increase to $15 million provid
Two types of state transfer taxes exist, and they work differently. An estate tax is levied on the total value of the deceased person's estate before it's distributed to heirs. The estate pays the tax — not the heirs individually. If an estate owes $200,000 in estate tax, that comes out of the estate before heirs receive their share. An inheritance tax is levied on individual heirs based on the amount they receive and their relationship to the deceased. Spouses typically pay nothing. Children pay a modest rate. More distant relatives or unrelated heirs pay higher rates. Pennsylvania charges 4.5% for children, 12% for siblings, and 15% for other heirs — with no general exemption amount. Some states have both: Maryland, for example, imposes both an estate tax on the total estate and an inheritance tax on individual heirs in certain circumstances. State / DC Tax Type 2026 Top Rate Portability?** Exemption** Oregon Estate $1,000,000 16% No Massachusetts Estate $2,000,000 16% No Washington Estate $3,076,000 20% No Minnesota Estate $3,000,000 16% No Illinois Estate $4,000,000 16% No DC Estate $4,988,400 16% No Maryland Estate + $5,000,000 16% Yes Inheritance Hawaii Estate $5,490,000 20% No Maine Estate $7,000,000 12% No New York Estate $7,350,000 16% No Pennsylvania Inheritance None 4.515% by N/A only heir class Connecticut Estate $15,000,000 12% No Source: Research report and state tax authority data (2026). Thresholds may be inflation-adjusted at varying rates; verify current figures with an estate attorney in your state. Iowa has been phasing out its inheritance tax and may complete the elimination by the time of publication.
Federal estate tax has portability — meaning a surviving spouse can elect to use the deceased spouse's unused federal exemption, in addition to their own. Most states do not offer portability. Without portability, the first spouse to die in a state like Massachusetts or Oregon cannot simply leave everything to the surviving spouse and trust that both exemptions will be available at the second death. The first spouse's exemption is gone unless it was used at the first death. To preserve both state exemptions, married couples in non-portability states must use bypass trusts — also called credit shelter trusts — that fund up to the state exemption amount at the first death for the benefit of the surviving spouse, while keeping those assets out of the surviving spouse's taxable estate. Failing to do this can double the state estate tax at the second death. A couple in Massachusetts with a combined $6 million estate, where everything passes to the surviving spouse outright, ends up with a $6 million taxable estate at the second death — with only one $2 million exemption available. The state tax on $4 million of excess can exceed $500,000. Proper bypass trust planning at the first death would have preserved both $2 million exemptions and eliminated the tax entirely.
For families in estate-tax states with estates between the state threshold and the federal exemption, the planning priorities are different from those for families facing federal exposure. Annual exclusion gifting is effective at any estate size — systematically transferring $38,000 per recipient per year reduces both state and federal taxable estate values over time. Gifts made well in advance of death are generally outside the state estate tax calculation, though look-back rules vary by state. Irrevocable life insurance trusts — structures that hold life insurance policies outside the taxable estate — are commonly used to provide liquidity for state estate taxes without increasing the estate. If an estate is illiquid (real estate, business interests), the tax bill becomes due nine months after death regardless of whether the heirs have cash to pay it. Life insurance held in an ILIT provides that liquidity outside the estate. Interstate relocation is the most direct solution for some families. Moving domicile from Massachusetts or Oregon to Florida or Texas before death eliminates the state estate tax entirely. This requires genuine relocation — establishing a new permanent home, obtaining a new driver's license, updating legal documents, and spending more than 183 days in the new state. (See Article 5 of Cluster 3D for the full domicile analysis.) **If you live in one of these states, the federal exemption doesn't protect you. An estate attorney in your state can tell you exactly what's at risk — and what a proper bypass trust or gifting plan could save.**
• State estate tax data from research report and state-specific sources — verify all current exemption amounts with an attorney in the relevant state before publication. • New York 'cliff' calculation: if estate exceeds exemption by more than 105%, tax applies to entire estate from first dollar — confirmed by New York tax law and cited in research report. • New York does not offer portability per state law — requires bypass trust planning. • Pennsylvania inheritance tax rates by heir class (4.5%/12%/15%) are accurate per PA Department of Revenue. • Iowa inheritance tax phase-out: research report notes Iowa is phasing out; verify current status before publication. • ILIT as liquidity tool for state estate tax: accurate general description — attorney review recommended. • Compliance: This article describes state tax mechanics — significant variation exists by state. The CTA correctly directs to an estate attorney in the reader's specific state. • Primary keywords targeted: state estate tax 2026, does my state have estate tax, estate tax by state. mission_test_pass: ☐ PENDING compliance_reviewed: ☐ PENDING
New York has one of the most aggressive state estate tax structures|New York estate tax on the full $7.8 million. That cliff can cost|Pennsylvania does not have an estate tax — but it does have an
Research report and state tax authority data (2026). Thresholds